Mika Lintilä (left), the Minister of Economic Affairs, and Erkki Ormala (right), a professor of practice in innovation management at Aalto University, held a press conference in Helsinki on 9 January 2019. (Credit: Mesut Turan – Lehtikuva)


DRAMATIC CUTS in innovation and technology funding have severely eroded the international competitiveness of Finland, concludes a report drafted by Erkki Ormala, a professor of practice in innovation management at Aalto University.

Ormala presented his report on the adequacy of the measures taken by the government to promote applied research to Minister of Economic Affairs Mika Lintilä (Centre) in Helsinki on Wednesday.

“It’s unfortunately a scientific fact that sustainable economic growth, productivity development and employment are dependent on successful innovation activity,” he stated in a press conference.

“The question at hand today is do we want to accelerate economic growth and consequently save the welfare state in Finland? Or do we want to continue on the current track, which will lead to a situation where it’ll no longer be possible for us to maintain the welfare state we’re accustomed to today?”

Ormala expressed his concern particularly about the fact that businesses are widely and rapidly re-locating their research and development activities away from Finland. His report indicates the share of research and development activities conducted abroad is projected to rise from 17 per cent in 2015 to 28 per cent in 2019.

“We also enquired about the reasons for this trend,” he said. “Funding is considerably more plentiful abroad and, as a result, it’s easier to carry out innovation projects abroad than in Finland.”

“Government funding for businesses’ innovation activities is 0.08 per cent of gross domestic product, meaning the amount of money given by the government to support businesses’ innovation activities is among the lowest in the OECD,” highlighted Ormala. “We should get at least a little bit closer to the international standards to make sure we aren’t dead last in this regard.”

His concerns are shared by Lintilä.

“The report delivers a clear message,” he conceded in a press release. “Finland has to reinforce its position as an attractive location for research, development and innovation activity, if it is to remain at the forefront of development. It is alarming that our businesses are moving their research, development and innovation activities overseas in a trend-like fashion.”

Ormala acknowledged that corporate investments in research and development will grow moderately also in Finland in 2017–2019. The upward trend, however, is evidence rather of the positive economic situation than the willingness of businesses to invest in research required for their next-generation business activities in the country.

Less co-operation opportunities

Finland can also no longer take pride in its public-private partnerships in the field of research, development and innovation.

“Co-operation between universities and businesses has decreased by more than 40 per cent over the past seven years, when measured in terms of funding provided by businesses. That’s an enormous collapse. Nowhere else has such a collapse taken place,” said Ormala.

Finnish universities, he highlighted, received 8.5 per cent of their research funding from businesses in 2008 but no more than 3.9 per cent in 2017.

“We have to create clear incentives for universities and research institutions to engage in co-operation with the corporate world. That’s the only way to restore the positive culture of co-operation that was evident in Finland in the 1990s and early 2000s,” he said.

“We have universities where co-operation with businesses has decreased by 70 per cent. That’s quite the frightening development in light of how fast it has taken place.”

Lintilä similarly viewed that consolidating co-operation between the public and private sectors must be a key objective of overhauling the innovation policy, as businesses cannot produce systemic innovations without the support of authorities.

Lack of predictability

Ormala also argued that the inconsistency and unpredictability of research and innovation policy making has undermined the ability of businesses and universities to make the long-term commitments required to develop new business operations.

“One year, the funding goes up. The next year, it goes down,” he summarised.

“You have to understand that innovation is a long-term effort from the perspective of businesses where they commit to developing a new kind of business activity. And that requires that there’s a clear understanding of how the funding base and the innovation environment will develop,” explained Ormala.

He stressed that it is consequently of utmost importance to restore a tradition where research and innovation policy is developed in a co-ordinated and long-term fashion.

He also proposed that an additional 300 million euros be earmarked for applied research and co-operation funding for 2020–2022. The funding, he underlined, would not provide the country with an advantage over other advanced economies but would simply ensure it can remain competitive relative to its competitors at least in some respects.

Aleksi Teivainen – HT